Max Kingsley-Jones/LONDON
On the face of it, the Airbus and Boeing orderbooks have so far escaped much of the Asian gloom, with a third successive year of solid sales and production records. Order deferrals, however, have already begun, and airliner salesmen are bracing themselves for a tougher time ahead as the current delivery cycle peaks.
The production rates have steadily risen since the trough years of 1995-6, but airlines and leasing companies have resisted the temptation to rack up massive order backlogs as they did during the 1988-90 boom. This more controlled approach to the purchasing of aircraft with more than 100 seats has seen the Airbus and Boeing order intake remaining flat for three years, albeit at the buoyant level of 1,100-1,200 aircraft. Their order success in 1998 can be attributed to a redistribution of demand, with sales from Europe and Latin America filling the void left by Asia.
Boeing set an all-time delivery record with the shipment of 563 aircraft worth an estimated $43.7 billion and sold 656 aircraft worth $42.1 billion. Although it was ultimately beaten by Boeing, Airbus is still celebrating its best year ever, with some $39 billion worth of orders (556 aircraft), and a record 229 units delivered, valued at $13.3 billion.
The 1998 gross tally of 1,212 orders represents the second highest order total ever, although it is below the record 1,600 units sold in 1989 (many of which were later cancelled). Unless there is a sudden upturn, the industry looks set to see a dramatic slowdown in orders during 1999, with a second consecutive year of indifference from the cash-strapped Asian carriers, and probably more order deferrals. As this coincides with the highest levels of deliveries ever (around 900 units), this will see the current $221 billion order backlog diminishing after years of solid growth.
The current 3,100 unit backlog is well short of the record 3,500 total racked up at the end of 1990, thanks to the sensible buying policies adopted by customers. This is despite the fact that there is now the larger proportion of ageing, environmentally unfriendly, aircraft coming up for retirement than there were 10 years ago.
This change in buying strategy followed the pain experienced during the slump of the early 1990s which coincided with the last peak in airliner production. Airbus and Boeing have done much to encourage airlines to keep a firm rein on their backlogs, with the most significant action probably being a drastic reduction in production cycle time.
The "big two" now need six to nine months to produce their narrowbody types (from 16-18 months) and about 12 months for the widebodies. This provides greater flexibility for their customers' order planning.
In the past three years, the two rivals have adopted significantly different approaches in their efforts to meet burgeoning demand. Boeing has accelerated production of its "7-series" types from a low of some 200 units in 1995 to over 500 in 1998 - a 150% increase in less than 36 months. Airbus has steadily accelerated from a low of 120-130 units in 1995-6 to 230 in 1998.
The European consortium admits that this reticence to chase demand with huge production hikes has hurt it in certain sales campaigns - Airbus senior vice-president commercial John Leahy has said that deals went to Boeing because it offered earlier deliveries.
The good news for Airbus is that, as a result of the steady build up, it is well on course to achieve its target of holding 50% of the order backlog, despite being outsold by Boeing every year. Boeing's high delivery rate has offset its higher order intake, allowing Airbus to gradually gain ground on its US rival. Its share of the backlog passed the one-third mark in 1997, to reach 42% at the end of 1998.
The 1998 cancellations total of 78 units was below that of 1997 (88 units), as many airlines negotiated deferrals rather than outright cancellations. The estimated value of cancellations was greater in 1998 ($6.9 million against $5.5 million in 1997) as they included a larger proportion of widebodies, primarily Boeing 747s.
Boeing suffered the most cancellations, losing an estimated $4.9 billion from its backlog as airlines such as British Airways and Varig cancelled 747 orders, slicing the backlog of Boeing's long standing "cash cow" to around 100 aircraft.
This softening of the 747 market, which is seeing production cut to 12 a year from 2000, will not have gone unnoticed in Toulouse. While Airbus will relish the prospect of the market trading down from the 747, as it does not offer a rival, this lack of interest in large capacity aircraft casts a shadow over its efforts to get the A3XX project off the ground.
Airbus may still decide, however, that now is the time to launch the project to ensure that the 560-seater is ready for the next upturn, expected early in the new millennium.
Source: Flight International
